D.C. Council Chair Phil Mendelson warned Friday that the Bowser administration’s proposed tax increases on commercial real estate could be a significant drag on the District’s economy.

D.C. Council Chair Phil Mendelson warned Friday that the Bowser administration’s proposed tax increases on commercial real estate could be a significant drag on the District’s economy.

Mendelson, speaking at the Downtown D.C. Business Improvement District’s annual State of Downtown forum, said Mayor Muriel Bowser’s fiscal 2020 budget could have a ripple effect on things ranging from property sales to hotel stays and convention business at a time when office and retail vacancy rates are already elevated.

“I think sometimes we, and when I say we I mean city hall, loses sight of how subtle economic influences can be in affecting our economy,” Mendelson told the crowd assembled inside the Newseum.

The revenue from Bowser’s proposed tax increases would fund affordable housing initiatives, which the mayor has said is a critical issue, but parts of D.C.’s building industry have voiced concerns about the call to raise taxes on commercial real estate transactions.

Bowser introduced her budget March 20. Council has scheduled several public hearings, markups and work sessions on the proposal to be followed by the second of two budget votes for May 28.

Bowser did not directly address the issue during her public remarks. But, in an interview following the event, she told the Washington Business Journal affordable housing isn’t a concern that falls to just one part of the District to address.

“What we also hear from communities is how they aren’t able to attract employees, and if we aren’t able to attract people to live here and be employed here, that will be a significant drain on our economy,” Bowser said. “The city’s number-one concern is affordability and affordable housing, and so what my proposal includes is how we make equitable investments, and we’re very proud of that.”

Mendelson, in his remarks, noted the mayor’s proposal would impose yet another round of tax hikes on the District’s hospitality industry, which could potentially depress the amount of money the District collects from conventions, tourism and retail sales. He noted that she has proposed raising taxes even though D.C. revenue has continued to rise by about $2.2 billion over the past four years.

The proposal comes at a time when downtown’s office vacancy rate hit an all-time high of 12.6 percent and its retail vacancy rate increased from 8.5 percent to 9.1 percent last year, according to the BID’s annual report, released Friday. The BID’s annual report highlighted other, more positive figures for downtown D.C., including development interest “at near-record levels,” factors that the District should celebrate but take in context.

“I see this event as an opportunity not just to look at successes downtown but also to look at, closely please, the warning signs of where things need to get more attention and we need to be more careful,” Mendelson said. “Is the commercial vacancy rate at an acceptable level, for example? Or the retail vacancy rate at an acceptable level? And then, look as well, today, at what the city, what more the city should be doing to ensure that we continue to economically thrive.”

https://www.bizjournals.com/washington/news/2019/04/26/d-c-council-chair-sounds-warning-signal-on-bowser.html